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Tuesday, 11 November 2014

What the "SAC" Is Going On?

For FPM's enterprise entitled “No Smoke Without Fire: of Reputation
Risk” we were reminded yet again that criminality
is a servant of corporate enterprise. FPM joined-up thinking draws
parallels from the widespread vogue of United States of America government enforcement
prosecutions against financial and corporate crimes in capitalism.

The case involving Switzerland-based
global bank UBS AG (UBSN.VX) (UBS.N) and its wealth management division head
Raoul Weil resulted in an acquittal verdict from a legal technicality about burden
of proof. Detrimental global bank tax-avoidance roguery was at issue with yet
another case of combined American government authorities, this time Department
of Justice (DoJ) and the Internal Revenue Service (IRS), seemingly taking retributive
action against intrinsic corruption in capital markets, or indeed against capitalism
itself. The DoJ spent six years trying prosecute Mr Weil, including extraditing
him from Italy last year. Also, this particular case highlights increasingly onerous burden of proof towards incriminating senior executives with financial clout,
while lower ranking corporate figures plead guilty and co-operate as witnesses
for lighter plea agreement sentencing.

FPM will further follow closely
this and similar tax-fraud cases as part of widening the FPM's “NSWF:Reputation”
template; which was initially honed on SAC Capital insider trading amid their litany of legal proceedings, as understated in the financial media yet aggregated by FPM to display the sheer "iceberg theory" extent of insider trading that remains concealed. And we only focused on one solitary hedge fund founded by Steven A Cohen with his initials SAC Capital ("SAC")..

Remarkable that the FPM Reputation Blacklist or “Rogues
Gallery” (shown above) is comprehensive with 20 plus insider-trading associated individuals. Compared to
the pandering mainstream media (msm) accounts of only 8-10 criminally
charged and convicted as one time SAC
employee. With intention to deceive public opinion and interest, downplaying illegality and criminality at SAC is an artifice of Mr Cohen's external public relations firm Sard Verbinnen & Co. FPM list appropriately includes former or current SAC staff pleading
guilty and co-operating with enforcement authorities, and those uncharged but
implicated as co-conspirators in the “criminal club” cases. The mitigating
factor is that staff turnover at SAC Capital, in line with other financial
firms tend to be high, so association or links to a firm is exponential and
inevitable, but their insider trading being synonymous with notorious
ringmasters / hubs is unavoidable. For example, consider an FPM Reputation
Blacklist for one time Goldman Sachs employees associated in insider trading
and other securities fraud the list would be tediously exhaustive probably!

Bear in mind that DoJ and the SEC
are boasting 85+ convictions or guilty pleas to-date since the crackdown began
in October 2009. Also, as of October 23rd last month, SEC
stated “…Galleon-related enforcement
actions against 35 defendants.” And news typically report for a firm of “..Fourteen people pleaded guilty in the
Galleon case, and at least nine others are charged”. Clearly, the numbers
stack-up in validating FPM enumeration
of SAC-connected criminality rather than msm financial press data.

Further, FPM list ONLY includes
insider trading violations by one-time SAC Capital employees investigated, by
the deliberately stymied and poorly resourced enforcement of the SEC. Remember
that the SEC were set up as the police equivalent of the securities and
investment industries. Their job is to enforce securities regulations and
legislation – seemingly especially at lower ranking company men! To validate
Steven A. Cohen as only ‘allegedly’ presiding over a “web-of-securities-fraud” and
receiving an administrative “slap-on-the-wrist” by the securities regulator, despite
the numerous foot-soldiers and lieutenants ensnared in multi-years insider-trading
prosecutions, is utterly shambolic
oversight and law court proceedings by the DoJ. We charge Eric Holder as
the attorney general of USA. Our SAC-associated blacklist aimed at spreading
historical knowledge or simply reputation is obviously even more exhaustive when
including other types of securities fraud. An extended “Reputation Blacklist” of
SAC-tainted individuals and firms, which FPM have compiled internally to assist
external manager due diligence (available for a consultancy fee), for example includes
publically disgraced Forrest Fontana in stock-shorting violation (more in
“NSWF: Of Reputation”, a chargeable document).

Outstanding Issues
Regarding Steven A. Cohen et al (“SAC”):

A potential legal precedent from a landmark second circuit court appeal
against Anthony Chiasson’s insider trading conviction may make insider
trading prosecutions even more difficult to convict; and indirectly
mocking and besmirching the legality of definition, interpretation and
application of what constitutes insider trading after its 80 years of
existence.

The second circuit appeal court decision may be
elitist by setting a new stringent burden
of proof for “downstream tipee” cases; as affecting the legal conviction
of Michael Steinberg and Mr Chiasson, as well as his co-defendant Todd
Newman. FPM’s “elitist” accusation is based on higher-up corporate
executives can deny knowledge of shenanigans lower down. That’s a
corruption of capitalism - “where does the buck stop?”. Our
long-memory or historical knowledge suggests most SEC cases in the past were
based on circumstantial evidence. Also, FPM are not certain if this
technical appeal is not a court ruse for the convicted perpetrators to
delay starting their jail sentences (Mr Steinberg was convicted in December
2013 and still out on bail are Mr Chiasson and co-defendant Mr Newman
after conviction December 2012), or other time extension ploys, or indeed a
technical fudge in applying Rule 10b-5of the Securities Exchange Act of 1934 relating to insider trading.

Pending this second circuit court appeal decision
the SEC is currently reviewing the industry ban imposed on Mr Steinberg
and suspending other
insider-trading administrative enforcement actions, including Mr
Cohen’s. The DoJ “asked to stay the
SEC's failure-to-supervise proceeding against the head of SAC Capital,
Steven A. Cohen, 'until at least the Second Circuit issues a decision in
the Newman/Chiasson Appeal.”.

Incredibly, The Artful Dodger (another FPM nickname
in “NSWF: Reputation”), Mr Cohen has not only evaded court prosecution but
seems to be slipping out of SEC administrative admonishment: a) for
failing to supervise convicted Mathew Martoma and Mr Steinberg and b) to
ultimately ban him from the investment industry have been postponed in
April and again in August this year. FPM wonders if this is a mock persecution to appease the public’soutraged indignation of a scandalous
securities fraud ringmaster avoiding not just criminal justice, but also
escaping exemplary industry defamation – by banishment from operating in
it.

Fresh new
cases of insider trading allegations involving research / consultant
group or “expert network” Height Securities, and its prior communication
with senior politician on a government policy decision and announcement in
April 2013; affecting the share price of health insurance companies. Yep,
you guessed it, SAC Capital included in a list of hedge funds receiving
“heads-up” information.

Of the Government convictions and pleas gained in
the insider trading cases FPM monitoring how many convicted cases will be given class-action litigation status
by courts. This could open a flood of litigation benefitting
class-action firms and harmed investment management firms and ultimately
their investors in the litigated securities.

Stop The
Press! Preet Bharara, lead attorney at the important South District
Court of New York and protagonist in NSWF was a front-runner to be elected
for the top job of Attorney General at the DoJ. On 10 October yesterday, President
Obama choice for the most powerful
legal position of USA was given to another to replace
running-for-the-hills incumbent of the post Eric Holder. Though we may
never know the actual reasons for the choice of top judicial job, one
reporter has intrepidly already suggested that his aggressive pursuit
of corruption is not good politics for career progression: “…he has been relentless in his
prosecution of Wall Street tycoons, domestic/ international terrorists,
corrupt public officials, and even foreign diplomats as in the case of
Devyani Khobragade”; remember Eliot Spitzer’s corruption crusade
and subsequent downward spiralling
career. FPM relationships resources suggest that headline top-jobs are not
for those of Indian-American origin, as it may unsettlingly remind the American
people of their non-nativity in North America, especially to follow on
from the first Afro-American Attorney General, and no need to mention the
first Afro-American president.

As FPM have intimated before, that there is still a
sting in the tail for this SAC-saga,
and that rests on the shoulder Mathew Martoma and family. Or less possibly,
Mr Cohen’s inner circle of Mr Steinberg, Richard Grodin and David Ganek
may flip to give State evidence. Mr Martoma squealing to authorities for
the chance to avoid 10 years jail and confiscation of his millionaire
trappings may yet force him turn evidence to incriminate SAC. We think Mr
Martoma or undeniably any others with evidence against Mr Cohen can be hero of humanity but they need divine
courage to upset the applecart.

The case of Patricia
Cohen against Mr Cohen for fraud and breach of fiduciary claims is still
pending; she stated in lawsuit filed in 2009 “he [Mr Cohen] had received inside information in advance of the
purchase of RCA Corp. by General Electric Co.”. The case is scheduled for a hearing on Nov. 13, 2014. Watch
this space! The case is Cohen v. Cohen, U.S. District
Court for the Southern District of New York, No. 09-10230.

The appalling journey of a 10
years’ probe into insider trading without catching few ringleaders is strong
evidence that enterprise of a billionaire over-rides legal justice concerns in
the modus operandi of capitalism.
More alarmingly, as “FPM Reputation Blacklist” amendment proves, the public
interest is only given propaganda lip-service by contrived and trite public
relations communications and msm financial press. Such systemic imbalances and
corruption leads to social disaffection and discord, perhaps explaining the strong
raison d’etre of freedom and popular revolt movements gaining momentum globally,
even heralding “Destroy Capitalism!” FPM’s shout is less radical but with similar
aims: “Destroy Corruption of Capitalism”.

At the climax of US district
court attorney Preet Bharara’s insider trading enforcement, if the
“Unconscionable Mr Cohen” himself IS NOT criminally charged, while the firm
bearing his name pleads guilty to criminality and settles for multi-billion
dollars (US$1.8 bn plus legal expenses), then the attorney’s biggest scapegoats are Raj Rajaratnam
of the Galleon Group and Messrs. Martoma and Steinberg of SAC Capital. Now compare the 1980s insider
trading triple scalp of Ivan Boesky,
Michael Milken and Dennis Levine. Whatever the merits and demerits of the
American Politico-judiciary system, and clever technical litigation by Mr
Cohen’s defence, it is clear that political expedience and multi-billion
dollars remuneration for the capitalists’ infrastructure of DoJ and SEC, won
the day. Pity the Poor Man’s Pocket Aye! Mr Bah

For Mr Bharara efforts at
recouping money largely for the USA Government and an incommensurately smaller
portion to reimburse other disadvantaged investors and ultimately pensioners
and other long-term savers, validates incestuouspolitics and capitalism. “Democracy”
or the rule of society by the people is ultimately defunct and only a pseudo
notion. Where are the developments in laws enforcement in the securities
industry to expand enforcement in the wider public interest? In 1972 John Wells
a New York lawyer, led a panel on enforcement issues, which resulted in the
Wells Notice many corporate America and portfolio manufacturers know only too
well. FPM has an “enterprising execution” from its 3-pronged process).

Whereas “Plutocracy”, an organisation
of society by wealth, is clearly alive and kicking. Witness Mr Rajaratnam penalty
fine of under US$100 mn and jail sentence exceeding 10 years, a near record
prison term for insider trading; versus Mr Cohen’s record US$1.8 bn global plea
agreement / “payoff” and NO jail time and perhaps a slap on the wrist and told
not to do it again. Proof that criminality
is a servant of plutocrats. In astonishment, FPM echo “What the SAC is going?”